GREAVES COTTON LIMITED. INVESTORS MEET May 2012

Transcription

1 GREAVES COTTON LIMITED INVESTORS MEET May 2012

2 Disclaimer Certain statements in this presentation concerning our future growth prospects are forward looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in our industry of operations including those factors which may affect our cost advantage, wage increases, our ability to attract and retain highly skilled professionals, cost overruns, client concentration, our ability to manage our international operations, our ability to successfully complete and integrate potential acquisitions, liability for damages on our contracts, the success of the companies in which Greaves Cotton Limited has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Greaves Cotton Limited may, from time to time, make additional written and oral forward-looking statements, including our reports to shareholders. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the company. 2

3 CONTENTS About GCL Key Differentiators Financial Growth Plans 3 3

4 GREAVES IS ONE OF THE LEADING ENGINEERING COMPANIES IN INDIA... LIGHT ENGINE UNIT V, AURANGABAD: High Quality and Efficient Manufacturing 4

5 WITH RICH HERITAGE OF OVER 150 YEARS Established in 1859 by James GREAVES, joined later by George COTTON Manufactures wide range of industrial products such as Diesel / Petrol Engines for Automotive and Industrial applications, Gensets, Pumpsets, Farming Equipment and Construction Equipment at 12 manufacturing facilities. Company is in the process of establishing its footprint overseas and has established offices in U.K. and China and two subsidiary companies in Germany and Middle East Diversified business lines, multiple products and many customers have enabled to de-risk the business model 5

6 GREAVES HAS MADE RAPID STRIDES OVER THE PAST DECADE 2004 Rolls Out Millionth Light Diesel Engine 2007 Acquires Bukh Farymann Diesel GmbH, Germany 2008 Technology Centre and manufacturing facility for the new G Series engines opens in Pune Acquires Ascot International FZC, UAE 2009 Crosses two million in light diesel engines 2012 Crosses three million in light diesel engines 2011 Shendra Plant (Automotive Engines) and Chakan Plant (Gensets) commissioned 6

7 THE COMPANY OPERATES THROUGH FIVE BUSINESS DIVISIONS WITH AUTOMOTIVE BEING THE LARGEST GCL - Business Divisions Wide range of farming equipment to enhance farm productivity Market leader in Petrol / Kerosene Engines Product Range: o Petrol / Kerosene engines & Pumps o Portable / Conventional Diesel Pump-sets o FARMING EQUIPMENT Power Tillers, Reapers & Mini Farming equipment Manufacturing & Product Development Facility at Gummidipoondi (TN) AUTOMOTIVE ENGINE Light Diesel Engines for automotive application - Range : 4.4 to 25 HP Market leader in single cylinder diesel engine Product conformance to emission norms Manufacturing & Product Development Facilities at Aurangabad (MH) and Ranipet (TN) I INDUSTRIAL ENGINE Diesel Engines from 1.4 to 750 HP range with option for CNG / LPG fuel Provide engines for different industrial applications Manufacturing & Product Development Facilities at Pune In-house foundry for custom built castings AUXILIARY POWER Fuel efficient, rugged and reliable Gensets conforming to latest emission norms Range: 500 VA to 550 kva Manufacturing & Product Development Facilities at Pune CONSTRUCTION EQUIPMENT Construction machinery for infrastructure sector Compaction Products - Vibratory, Tandem & Pneumatic Tyre Rollers Concreting Products -Concrete pumps, Transit Mixers, Batching Plants Earthmoving - Wheel Loader & Motor Grader Manufacturing & Product Development Facilities at Gummidipoondi (TN) ENGINE SEGMENT (91%) INFRA SEGMENT (9%) 7 7

8 GREAVES OFFERS A DIVERSIFIED PRODUCT PROFILE TO ITS VALUED CUSTOMERS GCL - Major Products FARMING EQP AUTOMOTIVE INDUSTRIAL ENGINE AUXILIARY POWER CONSTRUCTION EQP Power Tiller Single Cylinder Engine Marine Engine Portable Genset Road Compactor Reaper Twin Cylinder Engine 8 Cylinder Engine Canopised Genset Paver Petrol Engine Twin Cylinder Engine with Power-pack G-Series Engine Non-canopised Genset Transit Mixer 8

9 9 AND SERVES MULTIPLE SECTORS OF INDUSTRY GCL End Use Sectors FARMING EQP AUTOMOTIVE INDUSTRIAL ENGINE AUXILIARY POWER CONSTRUCTION EQP Medium & Small Farms Gardens & Landscaping 3 Wheeled Commercial Vehicle manufacturers 4 Wheeled Small Commercial Vehicle manufacturers Agriculture Fire Fighting Mining & Construction Material Handling Rail Cars Road Sweepers Marine Propulsion Manufacturing Enterprises Commercial & Residential Complexes Hotels Hospitals Defence Retail Outlets Marine Applications Concreting Industry Construction Industry Roads Building; Asphalt Paving

10 SHAREHOLDING PATTERN SHAREHOLDING PATTERN (as on ) 12.6% Share Capital : INR Cr 35.8% 51.6% Listing : Bombay Stock Exchange (BSE) National Stock Exchange (NSE) Promoters Institutional Investors Indian Public Market Capitalization : INR 2,274 Cr (as on ) GREAVES COTTON LIMITED Subsidiary Companies International Subsidiaries Greaves Cotton Netherlands B.V., Netherland Greaves Farymann Diesel GmBH, Germany Ascot International FZC, UAE Indian Subsidiaries Greaves Leasing Finance Ltd Dee Greaves Ltd Greaves Auto Ltd 10

11 CONTENTS About GCL Key Differentiators Financial Growth Plans 11 11

12 GREAVES VALUE PROPOSITION RESTS ON THE PILLARS OF TECHNOLOGY, VALUE AND REACH TECHNOLOGY GCL VALUE REACH 12

13 THE COMPANY DERIVES STRENGTH FROM STRONG INHOUSE PRODUCT DEVELOPMENT CAPABILITIES. New Products Introduced 900 cc BSIII engine delivering 18 hp for automotive applications 265 cc BSIII engine delivering 9.5 hp for automotive applications 6 cylinder: 196 HP BS III diesel engine for industrial applications New engine applications launched for Combined Harvester, Road Sweeper, Transit Mixer, Concrete Pumps 60 CBM Twin Shaft Batching Plant Economy model of 4 HP Diesel Pumpset 4.5 HP Overhead Valve Petrol/ Kerosene Engine Strong Technology Base 13

14 ... AT OUR WORLD CLASS TECHNOLOGY CENTERS Strong R&D set-up in India with State-of-Art Technology Centers for Engine Development at Aurangabad and Pune with over 100 R&D personnel Technology Center for Farming equipment development under construction TECHNOLOGY CENTRE Aurangabad State-of-the-art Technology Center dedicated for diesel engine development for automotive applications Strong relationship with world renowned engine designers Technology Centre at Aurangabad Focus on extending diesel engine range to KW for commercial vehicles Design Centre TECHNOLOGY CENTRE - Pune State-of-the-art Technology Centre for multicylinder, multi purpose diesel engines upto 750 HP Testing facility equipped with sophisticated equipment is among the best in the industry Capability to test engines upto 2 MW Capability to test gas engines Strong Technology Base Test Centre 14

15 OUR STATE OF THE ART MANUFACTURING FACILITIES DELIVER QUALITY PRODUCTS TO OUR CUSTOMERS Greaves has 12 well equipped manufacturing facilities at Aurangabad, Pune, Ranipet, Gummidipoondi and Germany Our high quality, low cost manufacturing facilities leverage: o New generation manufacturing equipment o ISO/TS certified processes o Highly skillful team Our manufacturing has received citations in form of Gold Awards for Cost Management from ICWAI (2011); & for Indian Manufacturing Excellence by Frost & Sullivan (2008) High Quality and Efficient Manufacturing Infrastructure 15

16 GREAVES ALSO HAS A STRONG SALES & SERVICE NETWORK IN INDIA Strong Pan-India Reach 16

17 WE BELIEVE THAT OUR STRONG RELATIONSHIP WITH VARIOUS STAKEHOLDERS DRIVES OUR SUCCESS Our Employees Our Channel Partners Our Customers Our Community 17

18 CONTENTS About GCL Key Differentiators Financial Growth Plans 18 18

19 19 SNAPSHOT KEY ACHIEVEMENTS KEY ACHIEVEMENTS 3 millionth light diesel engine rolled out by Automotive Division Shendra Plant (Automotive Engines) and Chakan Plant (Gensets) commissioned Ranipet union agreement signed: pending for last 5 years Ranipet Unit expansion doubling the capacity is underway Brand visibility strengthened by Happy Engineering campaign

20 REVENUE FOR THE YEAR GREW BUT THE LAST QUARTER WITNESSED SLOWDOWN REVENUE Q4 (INR Cr) REVENUE (INR Cr) % 445 FY 11 FY % 1600 FY 11 FY 12 EBITDA Q4 (INR Cr) EBITDA (INR Cr) % 13.5% FY 11 FY 12 EBITDA EBITDA Margin (%) 15.0% 14.5% 14.0% 13.5% 13.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% % 13.5% FY 11 FY 12 EBITDA EBITDA Margin (%) 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% * FY 11 is figures for the period b/w Apr 10 to Mar 11 20

21 COMPANY HAD AN ADVANTAGE OF EXCEPTIONAL INCOME; LIKE TO LIKE PROFITABILITY CAME UNDER PRESSURE PBT Q4 (INR Cr) PBT (INR Cr) % % % % 20.0% 15.0% 10.0% 5.0% % % % % 14.2% 14.1% 14.0% 13.9% 13.8% 0 FY 11 FY % 0 FY 11 FY % PAT Q4 (INR Cr) PAT (INR Cr) % 20.0% % % % 10.0% % 10.0% % FY 11 FY 12 PAT after exceptional Items PAT before exceptional Items PAT Margin after exceptional Items 5.0% 0.0% % % FY 11 FY 12 PAT (After Exceptional Items) PAT (Before Exceptional Items) PAT Margin- After Exceptional Items 5.0% * FY 11 is figures for the period b/w Apr 10 to Mar 11 21

22 22 THE COMPANY ACHIEVED REVENUE GROWTH DRIVEN BY AUTO AND INDUSTRIAL ENGINES REVENUE DRIVERS: Revenue up by 10%... Automotive segment growth driven by 4 Wheel SCV (< 1T) segment Farming equipment maintained its revenue contribution- lower sales in pumpsets offset by faster growth in light farming equipment such as power tiller. Industrial Engines business expanded into new application areas such as construction equipment Contribution from exports increased in farming equipment, gensets and industrial engines Growth of genset and construction equipment business was impacted by slowdown in infrastructure segment Significant Investments done to drive future growth Organization Building: Focus on building the market development teams across segments Brand visibility strengthened by Happy Engineering campaign

23 THE COMPANY HAS SUSTAINED GROWTH IN LAST 5 YEARS REVENUE (INR Cr) EBITDA (INR Cr) CAGR of 11% CAGR of 9% FY 08 FY 09 FY 10 FY11* FY12 FY 08 FY 09 FY 10 FY11* FY12 PBT (INR Cr) PAT (INR Cr) FY 08 FY 09 FY 10 FY 11* FY 12 PBT (Before Exceptional Items) PBT (After Exceptional Items) FY 8 FY 9 FY 10 FY 11* FY 12 PAT (excluding Exceptional Items) PAT (including Exceptional Items) * FY 11 is figures for the period b/w Apr 10 to Mar 11 23

24 RETURN ON CAPITAL EMPLOYED AT 33% AND ROE AT 31% IN FY12 RETURN ON CAPITAL EMPLOYED (%) 52% 38% 22% 39% 44% 33% Reasons for decline: FY07 FY08 FY09 FY10 FY11* FY 12** RETURN ON EQUITY (%) 48% 33% 32% 28% 31% 14% Pressure on profitability due to product mix and pricing pressure on certain sectors Investments made in manufacturing units; capacity is still to be fully ramped up FY07 FY08 FY09 FY10 FY11* FY 12** * FY 11 is figures for the period b/w Apr 10 to Mar 11 ** FY 12 ROE figures is based on the PAT including exceptional items 24

25 THE COMPANY PROVIDED BETTER SHAREHOLDER RETURNS IN FY12 FY 08 FY 09 FY 10 FY 11* FY 12** EPS (Rs.) DPS (Rs.) Avg. Market Price (Rs) Net Worth (Rs. Cr) BVPS (Rs.) Net Debt ( Rs. Cr) * FY 11 is figures for the period b/w Apr 10 to Mar 11 ** EPS and DPS have been computed based on the PAT including exceptional items 25

26 SNAPSHOT - INCOME STATEMENT Rs Cr FY11 FY12 Q4 12M Q4 12M Revenue EBITDA Depreciation Interest Other Income PBT Income from Exceptional Items PBT after Exceptional Items PAT (excluding exceptional items) PAT (including exceptional items)

27 SNAPSHOT - BALANCE SHEET Rs Cr Mar 11 Mar 12 Equity & Liabilities Shareholders Fund Non- Current Liabilities Current Liabilities Total Applications Fixed Assets (Net) Investment Current Assets Other Non- Current Assets Total

28 SNAPSHOT - KEY FINANCIAL & OPERATIONAL RATIOS Category Unit FY 11 FY12 EBITDA Margin % 14.8% 13.5% Profitability Net Profit Margin (exc. exceptional items) Net Profit Margin (inc. exceptional items) % 9.7% 8.2% % 9.7% 10.6% Fixed Asset Turnover Times Activity Average Debtor Days Days Average Inventory Days Days Average Trade Creditors Days Days

29 FINANCIAL STABILITY Credit Rating upgrade from AA - to AA by Fitch Consistent track record of paying quarterly dividends Consistent Revenue growth- Improvement in Operating Cash Flows Low Gearing: Nearly debt-free 29

30 CONTENTS About GCL Key Differentiators Financial Growth Plans 30 30

31 KEY SECTORS OF GREAVES PRESENCE EXPECTED TO SUSTAIN GROWTH AUTOMOTIVE SECTOR Commercial Vehicle segment is dependent on level of industrial activity in the country. While, decline in industrial activity during the past year impacted the heavier load categories, the LCV segment maintained a healthy growth rate on account of continued strengthening of the last mile distribution network. As the road network in the country improves and level of urbanization increases, the hub and spoke transportation model will further strengthen and drive faster growth in the LCV segment The SCV segment (<1T) is sustaining its growth trajectory. 3W cargo slow compared to 4W. INFRASTRUCTURE & CONSTRUCTION SECTOR Infrastructure and Construction sector is a strong driver for our construction equipment and genset business The 12th Five Year Plan ( ) envisages investments of over $1 trillion in the sector. However, given the current policy/ political environment, these investments are expected to get delayed At a sub-segment level, road construction is expected to pick-up faster, as focus shifts to bringing the long delayed projects under NHDP to execution; Commercial construction is expected to remain suppressed for a slightly longer duration; Vast gap in power demandavailability expected to continue over the next decade Business environment expected to remain attractive for all businesses of Greaves Cotton 31

32 KEY SECTORS OF GREAVES PRESENCE EXPECTED TO SUSTAIN GROWTH INDUSTRIAL SECTOR Growth in industrial sector expected to revive towards second half of the current financial year. The long term growth trend remain intact and the sector will continue to attract investments in manufacturing, infrastructure and agriculture which will together drive growth in core sectors Growth in industrial sector will be driven by rising domestic demand as well as growing exports from India, as India emerges as the manufacturing base for the region POWER SECTOR The Central Electricity Authority (CEA) has projected an energy shortfall of 10.3% and peak shortage of 12.9% in the country during FY12. This is expected to worsen further as rising demand from industry, homes and shopping malls outstrips capacity growth The country has a projected energy shortfall of over 75,000 MW over the next five years to support GDP growth of 9%. This shortfall will drive growth of genset market as planned power projects to bridge this demand-supply gap are unlikely to be commissioned on time AGRICULTURE SECTOR Agricultural sector in India is experiencing rapid mechanization to improve productivity as food requirements increase to support a growing population base The increased scarcity and cost of farm labour is driving demand for farming equipment in the small and medium farms, which traditionally were not mechanized Export of agricultural machinery from India is providing further fillip to manufacturers in India Meteorological department has forecasted a normal monsoon in 2012, which augurs well for continued growth of the agricultural sector Business environment expected to remain moderately attractive for all businesses of Greaves Cotton 32

33 GREAVES IS WORKING ALONG STRATEGIC GROWTH LEVERS TO EXPAND ITS FOOTPRINT & DRIVE PROFITABLE GROWTH High Product Segments Med Low Customer Segments Local Few Multiple Regional Global Geographic Spread

34 THE COMPANY HAS IDENTIFIED FOUR IMPORTANT GROWTH LEVERS Strengthen in-house product development capabilities Close gaps in product portfolio Develop products for adjacent markets Strengthen channel partners Enhance International Business Enter into alliances with global players 1 Product Development Market Development 2 Organizational Operational 4 Development Excellence 3 Strengthen senior management team to support faster growth Drive performance driven culture Make Innovation the way of life at Greaves Organization wide cost optimization initiatives to improve profit margin Process improvement in Manufacturing and Supply Chain 34

35 GROWTH DRIVERS FOR EACH BUSINESS ARE ALIGNED TO THESE LEVERS AUTOMOTIVE Expand into higher capacity engines (>1T) Evaluate contract manufacturing opportunities Strengthen R&D capability for higher capacity engines FARMING EQUIPMENT Strengthen portfolio of light farming equipment Improve penetration in diesel and electrical pumpsets INDUSTRIAL ENGINE Develop new applications for construction and farming segment Upgrade engines to meet European emission norms AUXILIARY POWER Launch gensets in less than 15kVA and more than 500 kva range Strength service back-bone for gensets CONSTRUCTION EQUIPMENT Launch new products in concrete and road equipment segment Develop strong corporate accounts Strengthen international network to drive exports Enhance synergies within different businesses to drive aftermarket business 35

36 IT IS INVESTING TO BUILD GROWTH PLATFORMS AND CAPABILITIES Capex of Rs 105 Cr. during was primarily focused on capacity creation in light diesel and petrol/kerosene engine Capex of ~ Rs 150 Cr. during will predominantly focus on technology and product development capabilities and also completing Ranipet expansion Focused geographic expansion in chosen markets Company wide cost reduction program focused on Procurement and Manufacturing Excellence To ensure long term sustainability, it is investing in building organization, institutionalizing innovation and continuous improvement Plan to sustain brand building exercise 36

37 THE COMPANY HAS WELL LAID OUT PLANS TO IMPROVE BRAND VISIBILITY 37

38 THE COMPANY ALSO UNDERTAKES INITIATIVES TO STRENGTHEN CORPORATE SUSTAINABILITY Greaves is actively engaged in the empowerment of the disadvantaged and weaker sections of the society in Aurangabad (Maharashtra) and Ranipet (Tamil Nadu) Education, along with intellectual and skill development to ensure employability, is a key thrust area of the Company s CSR initiative Since 2006, Greaves has been adopting students from 6th Standard on the basis of academic performance and taking responsibility of making them employable Company provides books, uniforms, fees and scholarship till school education in completed Company sponsors the performing students to an ITI Course at the Govt. ITI, Aurangabad Post completion of ITI course the students are proposed to be engaged by the company under the Trade Apprenticeship Act After completion of their Apprenticeship, GCL will provide on the job training for six months to make them employable Greaves is also running a programs to educate and train girls Since 2008, 15 girl students of an Ashram school are chosen and provided support for education 38

39 GREAVES COTTON LIMITED